Global Market Comments
October 1, 2020
Fiat Lux
Featured Trade:
(HOW TO RELIABLY PICK A WINNING OPTIONS TRADE)
Global Market Comments
September 30, 2020
Fiat Lux
Featured Trade:
(INDUSTRIES YOU WILL NEVER HEAR FROM ME ABOUT
Global Market Comments
September 29, 2020
Fiat Lux
Featured Trade:
I HAVE AN OPENING FOR THE MAD HEDGE FUND TRADER CONCIERGE SERVICE),
(SOME SAGE ADVICE ON ASSET ALLOCATION)
Global Market Comments
September 28, 2020
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or DID THE ELECTION OR COVID JUST HIT THE STOCK MARKET?),
(SPY), (TLT), (GLD), (TSLA), (UUP)
Did the election finally hit the stock market? It could have been both or neither.
Certainly, the passing of Supreme Court Justice Ruth Bader Ginsberg was worth 1,000 points, and maybe more. It may open the door to a period in politics that is uncertain at best or become violent at worst.
But the Coronavirus is making a comeback too. The US topped 7 million cases and 200,000 deaths, more than any other country in the world. The president’s new pandemic advisor, Scott Atlas, seems to be advocating a “herd immunity” approach. If so, 53% of the population will get the disease causing a total of 3 million deaths. The pandemic will continue for years.
New cases are spiking in Europe. The UK, which was on the verge of ordering workers back to their offices is now going back to a total shutdown. That augers for a second big wave in the US as kids go back to school and universities reopen.
With the S&P 500 now down 1% on the year, 2020 basically never happened. We saw a whole lot of volatility with no net movement. It makes my own 34.50% profit this year look stellar by comparison.
With the twin challenges of Covid-19 and the election lower lows for the market beckon. The one-year charts show that a “head and shoulders” top is in place for the (SPY), so my downside target at the 200-day moving average stands. That would be 3,074 for the (SPX) and $84 for Apple (AAPL).
There is a chance that the Fed could intervene in the stock market one more time right before the election if the markets resume the cascading falls of the spring. If that happens, buyers will return in hoards. My view is that this is but another dip in a long-term bull market that started in 2009 and may run all the way to 2030. You especially want to load the boat with Apple again.
However, the mystery of why technology stocks are so expensive remains. Let me take another shot at this.
From a technology point of view, we have just completely skipped the 2020s and are already in 2030. A year ago, would you have ever imagined that all of the country’s children would now be going to school online or that you’d be sending your business suits to the Good Will?
Stock markets have yet to price in the 2030 level of technology and profit, so the stocks will keep going up. Maybe we are already at 2023 or 2025 prices. I’ll let you know when I find out.
Volatility rocketed last week, and stocks collapsed. Any chance of further Covid-19 economic stimulus this year has just been demolished. If you were worried about the presidential election eroding confidence in the market before, now you have to be positively suicidal.
Any doubts about traders going into cash before the election have been vaporized. A 4-4 Supreme Court now makes an election outcome uncertain, no matter what the actual vote. Price that into your dividend discount model!
US Corona Deaths topped 200,000, weighing heavily on the economy and the election. There is no sign that the death rate is slowing, possibly reaching 400,000 by yearend. I went out to dinner last weekend and one-third of all businesses were boarded up, with no sign of reopening, ever.
Twelve IPOs to hit last week. This is in the wake of the Snowflake (SNOW) deal last week that tripled off its initial price talk. Apparently, there is an extreme shortage of high-growth large cap technology stocks and Silicon Valley is more than happy to meet that demand. Flooding the market like this ends up killing the goose that laid the golden eggs and is a common signal of market tops. Existing stock holdings have to be sold to buy new ones, taking markets south.
The economy slows as stimulus hopes fade as confirmed by last week’s economic data. US Consumer Sentiment dove in August, while Weekly Jobless Claims hover just below a Great Recessionary one million. The pandemic remains the dominant economic issue unless you live online.
The NASDAQ whale continues to sell, as Softbank (SFTBY) continues to unwind its massive technology long options positions. Last week, it was Adobe (ADBE), Salesforce (CRM), and Facebook (FB) that got hit. We won’t know if they made money on these for months, but they certainly put the final spike top in for the technology bubble.
The biggest debt increase in history occurred, with Federal government borrowing up an eye-popping 59% YOY. Sell every rally in the (TLT). It’s just a matter of time before a flood of new issuance destroys this market. We are sowing the seeds for the next financial crisis. The government was running record deficits BEFORE the pandemic even started.
Existing Home Sales soared in August, up 2.4% MOM to 6 million units, the hottest since 2006. Prices are up a huge 11.4% YOY. Homes over $1 million increased by 44% YOY as both work and school move home. Properties sit only 22 days on the market to sell, a record low.
Elon Musk promised a $25,000 car in three years, fully autonomous with long range and no maintenance for the life of the vehicle. The lifetime cost would be half of conventional gasoline-powered cars. That was the outcome of Battery Day in Fremont, CA, attended by hundreds of devotees safely enclosed in Teslas who honked instead of clap. It is all the result of dozens of revolutionary design and manufacturing improvements currently in the works, like moving from lithium to raw silicon for batteries. If so, General Motors (GM) and Ford (F) have had it.
A US dollar crash is imminent, says my old Morgan Stanley colleague Steven Roach. The double dip recession is here inviting even lower interest rates. The current account deficit soared to record highs in Q2. Buy the Aussie (FXA), Euro (FXE), and yen (FXY) on this dip.
Investors pull $25 billion from Equity funds last week as a new wave of nervousness hit the market. It’s the third largest weekly outflow in history. Everyone and his brother is trying to get out before the election. Pick your conspiracy theory as to what could go wrong.
When we come out the other side of this, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old.
My Global Trading Dispatch stayed level at just short of an all-time high this week. I dumped my last two positions at the Monday morning opening as I could see the 1,000-point drop coming from a mile off, going to a rare 100% cash position.
The risk/reward in the market now is terrible. I believe we have to test the 200-day moving averages before it is safe to go back in with the indexes and single stocks.
That takes our 2020 year-to-date back up to a blistering 34.50%, versus a loss of 7.00% for the Dow Average. September stands at a nosebleed 7.95%. That takes my eleven-year average annualized performance back to 36.06%. My 11-year total return returned to another new all-time high at 390.41%. My trailing one-year return popped back up to 54.09%.
The coming week is a big one for jobs data. The only numbers that really count for the market are the number of US Coronavirus cases and deaths, now at 203,000, which you can find here.
On Monday, September 28 at 10:30 AM EST, the Dallas Fed Manufacturing Index is released.
On Tuesday, September 29 at 9:00 AM EST, the S&P Case Shiller National Home Price Index for July is announced.
On Wednesday, September 30, at 8:15 AM EST, the ADP Private Employment Report is printed. At 8:30 AM EST, the final figure for US Q2 GDP is disclosed. At 10:30 AM EST, the EIA Cushing Crude Oil Stocks are out.
change.
On Thursday, October 1 at 8:30 AM EST, the Weekly Jobless Claims are announced.
On Friday, October 2 at 8:30 AM EST, the all-important September Nonfarm Payroll Report is out. At 2:00 PM The Bakers Hughes Rig Count is released.
As for me, we have another superheating of the climate in store this weekend, with San Francisco Bay Area temperatures expected to top 100 degrees. The fires are out now, but high winds are coming so PG&E is expected to cut off electric power once again.
I’ll be fine with my solar and battery back-up. The Tesla power management software knows in advance when this is going to happen and automatically goes into maximum storage mode. But just to be safe and to keep the trade alerts coming, I am charging up the car and every battery I own.
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
September 25, 2020
Fiat Lux
Featured Trade:
(HERE’S MY NEXT CHIP TEN BAGGER),
(AMD), (INTC), (NVDA), (MU)
I am often asked which semiconductor company to buy. After all, this is not just the high beta play for the stock market as a whole, but the entire economy as well.
When times are good, consumers can’t get enough chips to stockpile. When they are bad, they are used as landfill. Semiconductors are the economy on a bungee cord.
For the past five years, the answer was always the same: top-end graphics card maker Nvidia (NVDA).
It was a great call. Since my initial recommendation in 2015, the stock has soared by tenfold, one of several ten-baggers I have been able to rake in during recent years.
Now it’s time to call the next ten-bagger.
That’s easy enough: Advanced Micro Devices (AMD).
(AMD) is an American multinational semiconductor company based in Santa Clara, California that develops computer processors and related technologies for business and consumer markets.
While it initially manufactured its own processors, the company later outsourced all its manufacturing, a practice known as going fabless, after GlobalFoundries was spun off in 2009. Chip foundry Taiwan Semiconductor Manufacturing (TSM) currently produces (AMD)'s chips.
AMD's main products include microprocessors, motherboard chipsets, embedded processors, and graphics processors for servers, workstations, personal computers, and embedded system applications.
In 2019, (AMD) brought in $6.48 billion in revenues, $631 million in operating revenue, and $341 million in net profits. It pays no dividend. For the current quarter, (AMD) expects revenue to rise an eye-popping 42% year over year to $2.55 billion.
The company was considered a lagging “also ran” for years, the poor cousin of Intel (INTC), Micron Technology (MU), and powerhouse Nvidia (NVDA).
Then Lisa Hsu took over in 2014. It has been straight up ever since. She immediately launched into a new generation of faster and more efficient chips, such as the Ryzen PC processors and Epyc server chips in 2017.
(AMD) now expects to ship its first revolutionary 7-nanometer processors in late 2022 or early 2023. Next to follow will be once unimaginable 3-nanometer processors. Now we are trying to get single electrons to go through gates.
AMD is also working with Hewlett Packard Enterprise (HPE) and nearby Lawrence Livermore National Laboratory on the El Capitan supercomputer for the U.S. Department of Energy. That gives the company another big advantage in developing new chip technologies.
As a result of (AMD)’s Herculean efforts, Intel was left behind in the dust, as its share price amply demonstrates.
Despite its recent ballistic growth (AMD) is still the smaller of the major chip companies. Its market capitalization stands at only $90 billion, compared to $209 billion for fading (INTC) and a monster $308 billion for (NVDA). Yet (AMD) boasts a higher growth rate.
If a global economic recovery ensues in 2021, (AMD) will be your play. As the move online vastly accelerates thanks to the pandemic, a global chip shortage is in the cards. Earnings, multiples, and share prices should all go up. The recent economic data from China shows that we are certainly headed in that direction.
Use this major selloff to stick your toe into (AMD).
To learn more about Advanced Micro Devices, please visit their website by clicking here.
Global Market Comments
September 24, 2020
Fiat Lux
Featured Trade:
(ELON’S BATTERY DAY BLOWOUT),
(TSLA), (GM), (F)
I have to admit that I have been buying into Elon Musk’s vision since I first met him more than 20 years ago, back in his PayPal days. He could see how the future would unroll for the next 50 years.
That has delivered the best investment of my lifetime, with my Tesla shares (TSLA) up 151X from my initial $16.50 cost.
Thanks to Elon, my home is now completely grid-independent, with 59 solar panels and three 13.5-watt Tesla Powerwalls. I am only connected to PG&E so I can sell them my excess power at afternoon peak prices. In the mornings, I recharge my batteries. That’s a cool thing to have when your local utility completely shuts off power for six days a year.
So it was with some enthusiasm that I attended Tesla’s annual shareholder meeting and Battery Day.
Elon Musk was there with all his swagger and confidence in front of a giant screen. The audience was limited to those sitting in Teslas to enable social distancing, and when they approved, they honked horns instead of clapping.
It was a noisy event.
The past five years have been hottest on record. Climate change is accelerating, so the time to step up the move to a truly sustainable grid is here. It is nothing less than a matter of survival of the species. As Musk spoke, pictures of San Francisco's recent orange days, when you could see 100 feet, flashed up on the screen. A hundred-fold increase in our efforts is called for.
The good news is that 76% of the new electricity generation built this year will be wind and solar, or 32 GW. In 2010, 46% of electricity was coal-generated. Today it is half. Trump promises to rescue the industry came to nothing.
Even if 100% of new electricity generation comes from alternatives, it would take 25 years to convert the entire national grid. There is not enough time left to accomplish this to avoid environmental catastrophe.
The three legs of the future of power are solar power, solar storage, and electric cars.
Tesla has made a major contribution so far in all of these, with over 1 million electric cars produced, 26 billion electric car miles driven, 5 GWh of stationary batteries installed (I have 40.5 Watts), and 17 terawatt-hours of solar power generated.
The Shanghai Tesla factory went from a pile of dirt to mass production in an amazing 15 months, and that facility will soon be doubled in size.
“Tera is the new giga,” said Elon. A terawatt is 1,000 times more power than a gigawatt.
The world needs 10 terawatt-hours of new battery production a year to transition the global car fleet to all-electric in 15 years. We need 1,600 fold growth in battery efficiencies to convert the entire grid to electric. That means we need 25 terawatt-hours a year for 15 years. That is Tesla’s goal.
Tesla’s present Nevada Gigafactory is producing only 1.5 terawatt-hours a year in batteries. Would need 135 more factories to meet the above demand with current technology.
To achieve this, Tesla needs to make cars cheaper. The cost per kilowatt is not improving fast enough.
Tesla’s current plan to cut battery costs by half working by improving every one of the dozens of steps of production.
The newest battery design brings 6X increase in energy density levels, will begin mass production in a year in Fremont. Interestingly, Musk relied on existing paper and mottle mass production as models. The design is too complex to describe here but is brilliant. It’s easier to understand with the graphics found in the YouTube video below.
Down the road, dry electrodes will bring further 10X improvement in power. New machine designs and processes will bring a 7X improvement in output. Tesla’s plan is to achieve a further 75% improvement in the cost of production. The eventual goal is to make Tesla the best manufacturer on earth.
By 2022, Tesla will see a 100 GWh production increase in batteries and 3 terawatt-hours by 2030. That is a 30-fold jump.
Silicon is the most abundant element in the world after oxygen and will be used to replace existing graphite chemistry. Moving from processed silicon to raw silicon will deliver cheaper anodes and an 18% cheaper battery. Cathodes will use nickel-manganese allowing an 80% cost reduction.
Some 100% of batteries are now recycled, will eventually become sole source of raw materials for new batteries. Thus, it will become a super-efficient closed cycle.
Tesla will also reduce car costs by casting the battery as a single piece of the car body. The aircraft industry first accomplished this with fuel tanks during WWII. This alone would eliminate unnecessary 370 parts.
The next upgrade in design and manufacturing will take three years to implement and deliver a 69% reduction in cost creating a “compelling” $25,000 car that is fully autonomous and will not need maintenance.
This chops the lifetime cost of Teslas by half when compared to conventional gasoline-powered engines. If Musk can deliver on this promise, General Motors (GM) and Ford Motors (F) are toast.
Tesla is also developing a new supercar. The Tesla Plaid Model S will have a 520-mile range, go from zero to 60 miles per hour in under two seconds, and offer a positively bestial 1100 horsepower motor. You can order yours at the end of 2021. No price was mentioned, but my guess is somewhere north of $250,000.
I already have the Model X with “ludicrous” mode that catapults from 0 to 60 in 2.9 seconds and just that presents a major whiplash risk.
After the event finished, it was clear that the stock market was not drinking the Kool-Aide, Tesla shares diving 5%. It turned out to be a big “buy the rumor, sell the news” event. When traders hear the words “long-term” they glaze over and run a mile.
We may need to wait for the next cycle of upgrades and product announcements to achieve a true upside breakout.
Global Market Comments
September 23, 2020
Fiat Lux
Featured Trade:
(AN INSIDER’S GUIDE TO THE NEXT DECADE OF TECH INVESTMENT),
(AMZN), (AAPL), (NFLX), (AMD), (INTC), (TSLA), (GOOG), (FB)
